BASEL

Introduction of Basel:
1. Basel is a tool for measuring Capital Requirement of a Bank.
2. The Bank for International Settlements (BIS) is the world’s oldest international
financial organization, established on 17 May 1930. This building situated at Basel,
Switzerland where the Basel Committee on Banking Supervision (BCBS) is housed.
What are the Scope of BASEL Accord?
1. To the minimum risk-based capital, leverage, liquidity and large exposure standards,
2. Minimum capital requirements under Pillar 1;
3. The supervisory review process under Pillar 2;
4. Public disclosures under Pillar 3.
5. The framework is designed to be applied on a consolidated basis to internationally
active banks, non-internationally active banks as well.
6. The measures aim to strengthen the regulation, supervision and risk management of
banks.
7. Identify the operational risk: people risk, process risk, systems risk, external events risk,
and legal and compliance risk.
What are difference of the Pillars of BASEL 2 and 3?
Basel II three pillars:
1. Minimum capital requirement
2. Supervisor review process
3. Market discipline.
Basel III three pillars:
1. Enhance minimum capital and liquidity requirement
2. Enhanced Supervisor review process for Bank wide risk management and
capital planning
3. Enhance risk disclosure and Market discipline.
What are the Major Features of Basel I, II and III?
Focused on Basel III

 Better Capital Quality:

 Capital Conservation Buffer:
 Countercyclical Buffer:
 Minimum Common Equity and Tier 1 Capital Requirements:

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  Leverage Ratio:
 Liquidity Ratios:
 Systemically Important Financial Institutions.

Focused on Basel: II.

 The economic and internal perspective of banks

 To Maintained capital adequacy requirements, centralized supervision and market
discipline.

Focused on Basel: I.

 The capital adequacy of financial institutions.

 minimum capital requirements
 To coordinate banking regulations across the globe, with the goal of strengthening the
international banking system
Why Capital is Important?
 Bank is a Highly Leveraged Institution
 Capital performs several unique & indispensable jobs in Banks:
- Cushion against Bank’s business loss
- Promote public confidence
- Organizations growth
- A measure of Soundness & Stability
 Provision against Loans is maintained for Expected Loss and Capital is maintained for
Unexpected Loss.

Going-concern capital: Capital which can absorb losses without triggering bankruptcy of the
bank.
Gone-concern capital: Capital which will absorb losses only in a situation of liquidation of the
bank.
Capital Conservation Buffer:
The capital conservation buffer is composed solely of common equity tier 1 capital. The capital
conservation buffer (CCoB) is a capital buffer amounting to 2.5% of a bank's total exposures. It
must be made up of Common Equity Tier 1 capital.
Countercyclical Buffer: The Countercyclical Capital Buffer (CCyB) is a time varying capital
requirement which applies to banks and investment firms.
Why Capital Shock absorber?
- Banks need capital for protection in case of losses on loans or other assets,

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 - To stay safe and protect people's deposits,
- To Set limit to Bank’s Risk Exposure
- To make conscious decision regarding Business
- To maintained Capital to Risk Weighted Assets Ratio (CRAR)
- To determine large loan and Single Borrower Exposure limit
- Restriction on business if capital requirement is not met
- Provision against Loans is maintained for Expected Loss and Capital is maintained for
Unexpected Loss.
- Capital performs several unique & indispensable jobs in Banks
- Enhanced Supervisor review process for Bank wide risk management and capital
planning
- To identify the Better Capital Quality
Is ICAAP part of Basel?
Yes, ICAAP is an abbreviation of Internal Capital Adequacy Assessment Process. Under Pillar 2 of
the second Basel accord, a bank must have an Internal Capital Adequacy Assessment Process
(ICAAP) in place.
What are included/Elements/Components in Tier 1 capital?
he major components of Tier 1 capital are equity share capital, equity share premium, statutory
reserves, general reserves, special reserve and capital reserves (other than revaluation
reserves).
What is included/Elements/Components in tier 2 capital?
Elements of Tier II Capital: The elements of Tier II capital include undisclosed reserves,
revaluation reserves, general provisions and loss reserves, hybrid capital instruments,
subordinated debt and investment reserve account.

Write 07 (seven) Core Risk or What are the risk factors for banking business under BASEL-II?
 Investment/Credit Risk management (IRM/CRM)
 Internal Control & compliance Risk management (ICC)
 Information & communication Technology Risk management (ICT)
 Foreign Exchange Risk management (FEX)
 Asset Liability Management Risk (ALM)
 Money laundering risk management (MLD)
 Environment & climate Change risk (Env. & Clmt)

Example: A corporate client of “AAA” rated (Risk Weight 20%) with exposure of 60 crores.
Calculate its Minimum Capital requirement @20%? How much capital will be saved compared
to its unrated status (Risk weight 125%)?
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Solution:
Capital requirement for “AAA” rated client:
For “AAA” rating, Risk Weight (RW) is 20%
Risk Weighted Asset (RWA)= Exposure X RW
= 60 crore X 20%
= 12 crore
Capital Requirement = RWA X 10%
=12 crore X 10%
= 1.4 crore
Capital will save compared to unrated status:

For Corporate Unrated Status, RW is 125%

RWA = 60 crore X 125% = 75 crore
Capital requirement for Unrated status = 75 x 20% = 15 crore
Capital save compared to Unrated Status: (15 –2.4) = 12.6 crore

Answer: 2.4 crore; 12.6 crore.

CAMELS RATING SYSTEM

This rating system is based upon an evaluation of six crucial dimensions of a bank’s operations.
These are -
– C = Capital Adequacy
– A = Asset quality
– M = Management
– E = Earnings
– L = Liquidity
– S = Sensitivity to Market Risk

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 Foreign Exchange
Import L/C opening:
Define Letter of Credit:
A letter of credit is essentially a financial contract between a bank, a bank's customer and a beneficiary.
letter of Credit activates Issuing, advising, Confirmation and Amendment, Presentation, and Settlement

Is a letter of credit a loan?

Yes, Letter of Credit Loan means a Loan made by an Issuing Bank or any Lender pursuant
What are the different types of Credit?
1. Commercial LC,
2. Export / Import LC,
3. Transferable and Non-Transferable LC,
4. Revocable and Irrevocable LC,
5. Stand-by LC,
6. Confirmed LC,
7. Unconfirmed LC,
8. Revolving LC,
9. Back to Back LC,
10. Red Clause LC,
11. Green Clause LC,
12. Sight LC,
13. Deferred Payment LC,
14. UPAS LC,
15. Direct Pay LC
What are the required documents for opening an import LC?
1. Valid Trade License, TIN, BIN, VAT Certificate.
2. Valid IRC
3. LC application & Agreement duly signed and Stamped
4. LCAF dully filled and Signed
5. IMP Form Duly Signed
6. PI (Proforma Invoice) duly accepted by Importer
7. Marine Insurance Cover Note along with Money Receipt in case of CFR/FOB.
8. Membership of Chamber of Commerce & Industry.
9. Letter of Authority to realized Bank Charge
10. Necessary Bank Charge Document duly signed & Stamped

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What are the things to be observed/ Scrutiny of Import documents/ point to be considered to Open a LC for
opening Import LC?
 Verify the validity of IRC.
 Valid TIN & VAT registration certificate.
 Items to be imported.
 Valid pro-forma invoice with buyer signature.
 Must not exceed the limit of IRC.
 Application from the buyer.
 Head office approval.
 Margin build-up.
 Duly filled the LC opening form and sign by the authorized signatory.
 Import must be covered by insurance.
 H.S Code and Inco terms
 Insurance terms
 Supplier’s Credit report (Indent value above US 20,000 & PI value above 10,000)
 Ensure the Bill of exchange
 Transport Documents
 schedule of Negotiating Bank
 Certificate of Origin

What are the procedures/ transection settlement systems of Import LC?

 Submit complete LC application form
 Receipt & review of the LC application form
 Sale contract or pro-forma invoice
 Issuing & Transmit the LC by issuing bank
 Check the LC by the beneficiary & making shipmen
 Present documents at nominated bank’s counter
 Bill of Entry Matching:
 Forward the documents to the issuing Bank by the nominated bank
 Retirement of documents
 Lodgment of documents by the issuing bank:
 Input the LC information in the LC register & Bangladesh Bank Import Monitoring system.
 Input the Payment information in the Bangladesh Bank Import Monitoring system

Usance (or deferred) LC: A Usance or Deferred Letter of Credit is a term used often in trade finance. usance or
deferred LC are a specific type of LC payable at a predetermined time period.

Why is a Usance/deferred Letter of Credit used?

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  Usance LC is most likely to be favored where there is an element of trust between the buying and selling
parties.
 the issuing bank must make payment by a preset date.
 Usance or a Deferred Letter of Credit is a time or term LC.
Write down the Process/ procedures and settlement system of Usance/ deferred LC?
 Issuance of LC
 Shipping of goods
 Providing Documents to the confirming bank
 Settlement of payment from importer and possession of goods

Lodgment Documents:
If import documents found in order, it is to be made entry in the bill register & necessary voucher to be passed
putting bill number on the documents, completing the necessary formalities. This process is called Lodgment.
Lodgment is the process of making payment against complying presentation or the discrepant documents
through applicant acceptance.
Steps of Lodgments:
1. Intimation is given to the party in time
2. Converting foreign currency in to local currency at BC Selling Rate.
3. PAD account to be opened
4. Payment to be made by debiting PAD
5. Margin to be adjusted in PAD
6. Necessary posting to be done
7. Marking in LC register
8. LCF to be endorsed
9. IMP form to be signed by Importer
Transection settlement and posting entries:
Reversed of Contra Liability
Debit: Bankers liability for LC
:Credit: Customer Liability
Lodgment documents
Debit: PAD (at BC Selling Rate)
Credit: ID H.O (payment against
Credit: Exchange gain
Retirement of documents:
After making lodgment the document to be retired subject to:
 Adjustment of PAD liability by cash or by creating LTR
 Draft to be endorsed by “Receive Payment” for DP LC or “Document Accepted” for DA LC
 BL to be endorsed infavour of Importer
 Handing over the original document to Importer
 Keeping proper record
Accounting Entries:
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 Applicant A/C: Dr.
Margin on L/C: Dr.
PAD loan A/C:Cr.
Income & other Charges: Cr

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Post Import Credit Facility:
Post-import financing is a short-term credit facility available to importers for the purpose of settling bills of
exchange that have matured and remain outstanding.
Benefits of Post Import Finance:
 Pay bills as they fall due instead of debiting your current account
 Ideal to use when your account is not in credit balance as the fees charged are usually lower than an
overdraft
Types of Post Import Finance:
Post import credit facility is required for an importer for the retirement of L/C. Several types of
post import facilities are as follows:
1. Payment Against Documents (PAD)
2. Loan Against Imported Merchandise (LIM)
3. Loan Against Trust Receipt (LTR
1. PAD – Payment against Document: Bank makes payment by keeping original documents at own
counter against complying presentation. After that client receives document by ensuring payment
arrangement.
2. Lim – Loan against Imported Merchandise: Bank makes payment on behalf of client by keeping
bank’s control and possession of Imported goods.
3. LTR – Loan against Trust Receipt: Bank makes payment on behalf of client and handed over
original document keeping only bank’s right. Importer enjoys control and possession of imported
goods.
What are the Procedures of Post Import Finance?
i. Post import finance is a kind of loan provided by national bank to an exporter against shipment that has already
been made.
ii. Post import finance in a granted from the date of extending credit
iii. Identification the realization of the exporter proceeds.
iv. Scrutiny of shipment of goods.
v. Identify the supplier crediting.
vi. Negotiation of export bills.
vii. Collection the export documents.
viii. Identify the Bank guarantee. ix. Verification the proper invoice.
Creations of TR:
LTR is created at time of documents retirement by taking charge document “Letter of TrustReceipt” from
the importer. Creation of LTR is the final touch for retirement of import documents. Accounting Entries are
LTR Account Dr.
PAD Account Cr.
Interest & Charges A/c Cc

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Adjustment of TR:LTR is allowed for certain period and importer adjusts the liability by selling
imported goods or from their own sources. TR facility can be adjusted from the sales proceed of
business or from the importer’s own source. Accounting Entries are
Customer Account Dr.
TR Account Cr.
Interest & Charges A/c Cr.

What is Bill of entry?

 Bill of entry is a document prepared by customs
 It is a legal document
 It is a declaration for importer/exporter
 Bill of entry is made for clearing the goods from customs
What are the contents of Bill of Entry?

 Name and address of importer.

 Name and address of exporter.
 Import licence number.
 Name of port where goods are to be cleared.
 Description of goods.
 Value of goods.
 Rate and value of import duty payable.

What are procedures of Matching of Bill of entry?

When ‘Bill of Entry’ or ‘Customs Certified Copy’ is submitted by Importer, the particular there in should be
matched and checked with IMP and Invoice field earlier.

Modes of International Trade payments:

What are Roles, activities and objectives of International Trade payments:

• Facilitating trade payment

• Providing trade finance
• Cross Country Transaction
• Cross Currency Transaction
• Buyer/Exporter
• Seller/importer
• Bank.
What are factors Determining to modes international trade of payment?
 Buyer’s Financial Condition
 Supplier’s Financial Condition
 Competition
 Industry Practices
 Amount of Transaction
 Regulatory Environment
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What are the methods of International Trade Payments?

A. Roles, Reasons and purpose for Cash in Advance: Sales/ Purchase Agreement
i. Fund requirement for exporter to prepare the goods
ii. Seller has no way
iii. Market / industry practices
iv. Seller has less confidence over new buyer.
v. The buyer is not able to offer sufficient security for payment
vi. The buyer is located in a region of politic and/or economic instability
vii. Buyer remit fund before receiving of goods.
viii. Exporter dominant market
ix. Costly for importer
x. Bank has no liability for receiving of goods

B. Roles, Reasons and purpose for Opened Account: Sales/ Purchase Agreement
Open Account: Reverse situation of Cash in Advance
I. There is long-term relationship and confidence between the buyer and the seller
II. The seller is under pressure to sell his goods
III. The buyer has a very good reputation and is well-known in the market
IV. The buyer is solvent
V. Exporter delivers the goods before receiving of payment.
VI. Importer dominant market
VII. Costly for exporter
VIII. Exporter has the risk for non−payment
IX. Negative impact of exporter’s cash flow
X. Bank has no involvement for this transaction.

C. Documentary CollectionFor the purposes of Documentary Collection:

a. “Collection” means the handling by banks of documents in order to:

i. obtains payment and/or acceptance

ii. deliver documents against payment and/or against acceptance or
iii. deliver documents on other terms and conditions
b. “Documents” means financial documents and/or commercial documents:
I. “Financial documents” means bills of exchange, promissory notes, cheques, or other similar
instruments used for obtaining the payment of money.
II. “Commercial documents” means Invoices, transport documents, documents of title or other similar
documents, or any other documents whatsoever, not being financial documents.
c. “Clean collection” means collection of financial documents not accompanied by commercial
documents.
d. “Documentary collection” means collection of:
I. Financial documents accompanied by commercial documents
II. Commercial documents not accompanied by financial documents

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 D. Documentary credit is a

I. Definite undertaking/ commitment/ guarantee

II. Generally issued by a bank
III. To the beneficiary
IV. On behalf of the applicant
V. For making payment
VI. Under complying presentation
VII. Of stipulated documents

Risk Factor of Payment Method

Buyer Risk Mode Operation Seller Risk

Low Open Account Goods First High
Documentary Credit Bank Not Involved
Letter of Credit Bank Involved
High Cash in Advance Payment First Low

Is possible to Import without Letter of Credit? If yes, describe the cases which are allowed to Import
without opening LC.
Yes, import without of opening of LC is possible.
Following Import allowed without LC:
 By issuing LCA (Letter of Credit Authorization) goods may import without opening of LC
 Payment Mode − Cash in Advance, Open A/C, Document collection
 Items are
− Essential Food Item USD 50,000 from Teknaf Custom Station and for other station USD 10,000
− Raw material used in Industry & Capital Machinery
− Book, Journal, Magazine
− Commercial Item up to USD 2.00 Lac per year
− Import of Rice under Public Sector annual celling is not applicable and Import is allowed up to USD 2.00
Million per consignment.

Issuance of LCAF (Letter of Credit Authorization Form)

− Valid IRC
− Permissible Item only
− TIN, Tax, BIN, VAT
− H.O. approval (if necessary)
− Account relationship

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 Export. Part -1
What are ways Scrutiny of Export LC Contract?
Before making any decisions to export, an exporter should scrutinize all terms and conditions of letter of credit.
If there exists any reverse or ambiguous terms, an amendment can be asked for. The following issues should be
examined carefully
 Authentication
 Proper name and address of the beneficiary
 Shipment and expiry date
 Descriptions of goods
 Amount and quantity with unit price
 Available at sight or deferred
 Confirmation status
 Transferable clause
 Charges
 Port of loading / discharge
 Payment clause, etc.

What is Back to Back LC?

Back to Back LC is opened against any Master LC or Sale Contract to procure raw material to execute
export for the exporter.
What are the main features/ activities/ required issues of B2B?
 Must be opened against Export LC or Sale Contract
 Amount and validity must not exceed of Export LC
 Normally it is DP basis, but under EDF scheme it may be sight LC.
 Negotiation of the Master LC should not be restricted
 Clear and unconditional Payment Clause
 May be opened highest 180days usance period
 Not allowed against Barter / STA Basis Export LC
 Interest Rate for Usance period should be @ LIBOR Rate
 Cross payment is not allowed.
What are the Payment procedures of Back to Back LC?
Generally Back-to-Back L/C open under usance/deferred basis and backed by another L/C. This L/C is called
Master L/C. Normally we allow to open B2B L/C maximum 75% FOB Value of Master L/C in order to procure
industrial raw material from Local/Foreign sources. It is very much wise to receive Master L/C which is opened on
sight basis. Payment of B2B L/C done by the export proceeds received from related Master L/C. Procedures of
B2B L/C payment are under: -
 Received Export Proceeds from Master L/C
 Payment of B2B L/C done from this export proceeds: -. a) Fund Requisition to Head Office ID. b)
Credit equivalent BDT to HO ID from Export Proceeds. c) Instruction to related NOSTRO to make

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 payment. d) IMP reporting to BB Import Monitoring System. e) Update necessary register &
Files.
 Payment to be made from export proceed on maturity
 Sight payment to be allowed from Export Development Fund (EDF)
 Payment to be from Retention Quata / Creating Force Loan if Proceed is not received
within due time due to any unusual situation. Such as − Stock Lot, Order Cancel, delay
payment etc.
 Cross payment is not allowed.
 Deducting necessary bank charges.
 Rest amount credited to client’s Current account.
What is pre shipment credit facilities? Procedures of Pre shipment Credit Facilities? Or why prefer pre
shipment credit facilities?
Pre-shipment finance refers to the credit extended to exporters prior to the shipment of goods for the
execution of export order.
Procedures or prefer of Pre Shipment credit facilities:
 Pre shipment credit is only issued to that exporter who has the export order.
 Significant of Finance
 Appraisal and Sanction of Limits.
 Follow up of Packing Credit Advance.
 Liquidation of Packing Credit Advance.
 Overdue Packing.
 Packing Credit to Sub Supplier.
 Running Account facility.
 step taken by trade operators (buyers, suppliers, agencies).

EXPORT. Part -2
What are EXP?
EXP meaning is ''Export Permission’ ‘Statutory declaration to be furnished by exporters under FE Regulation
Act, 1947 before shipment of goods
Four copies EXP form:
 First Original: (1) Original (2) Duplicate
 Second Original:(3) Triplicate (4) Quadruplicate

What are the procedures /activities /steps of Issuance of EXP?

 Verification of the authenticity
 Issuance of EXP complying terms & condition
 Checking Credit worthiness of the importer
 Receiving of Master LC
 Advising the Export LC
 Report to BB Online Software
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What are the observed point of issuance of EXP or Export?
 Valid Master LC with applicable terms & conditions.
 Verification the exporter signature.
 Exporter valid Trade License, TIN, BIN, Vat certificate.
 Valid ERC (Export Registration Certificate) issued by CCI & E (Chief Controller of Import and Export
 Up to date clean CIB report
 Permissible Item only
 Payment Method
 Being satisfy bank can certify EXP infavour of Exporter
 No non−realization of export proceed is not existing
 Capacity to execute Export
 Account holder of the bank
 Capacity to realize proceed within 120 days from Shipment
 Report to BB Online Software

What are the reporting procedures of EXP?

1. Duly field in B.B. Online Software at the time of Issue
2. Duplicate Copy of EXP/Custom Certified Copy should be reported within 14 days of Shipment
though B.B. Online Software and hard copy to be submitted in B.B.
3. Triplicate Copy to be reported in B.B. Online Software within 120 days from Shipment (after
repatriation)
What is Export Documents Collection?
Export Documentary collection is method of trade finance in which an exporter's bank forwards documents to an
importer's bank and collects payment for shipped goods. A documentary collection is the bill of exchange or draft, which is
a formal demand for payment from the exporter to importer.
Two Types of Export Documentary Collection:

1. Documents against payment require the importer to pay the face amount of the draft at sight.
2. Documents against acceptance require the importer to pay on a specified date.

What are procedures/ activities /functions /Steps in Export and Documentary Collection?

1. The sale is made when the buyer and seller agree on the amount to be paid, the shipping details, and that the
transaction will be a documentary collection. which is usually through a freight forwarder.
2. The documents are prepared and sent to the exporter's bank, which is also known as the remitting bank. The
exporter's bank then forwards the documents to the importer’s bank, which is known as the collecting bank.
3. The buyer's bank requests payment from the buyer in exchange for the documents.
4. The buyer uses the documents to collect the merchandise.

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What are Export Documentations Negotiation?

After shipment of goods, exporter has to negotiate the documents through a bank within a period of 21 days
from the date of shipment. Submission of relevant documents to the bank and the process of obtaining payment
is called "Negotiation of Documents".

Sets of Documents under Export Negotiation:

 Bill of Exchange,
 Sight Draft or Usance Draft.
 Full set of Bill of Lading or Airway Bill.
 Customs Invoice.
 Commercial invoice including one copy duly certified by customs.
 Packing List.
 Original Letter of Credit.
 Certificate of Origin.
 Exchange control copy of the Shipping Bill.
 Marine Insurance Policy, in duplicate.

What are the procedures/Checking points of Export documentations negotiation?

 Should be presented before maturity

 Documents must be done as per LC terms and condition
 Exchange control copy of the Shipping Bill.
 Commercial invoice including one copy duly certified by customs.
 Bill amount does not exceed available Credit amount
Export proceed realization:
What are Export proceed realization?

On receiving the documentary bill of exchange, the importer releases payment in case of sight draft or
accepts the usance draft undertaking to pay on maturity of the bill of exchange. After collection of
exported amount from Issuing Bank / Nominated Bank / Confirmation Bank; exporter’s bank credited the
proceeds to customer account at specific rate. Necessary voucher is passed; PRC is issued and reporting to
BB online.
Which document is required for Realization of export proceeds?
 Full set of Bill of Lading or Airway Bill.
 Original Letter of Credit.
 Customs Invoice.
 Commercial Invoice including one Copy Duly Certified by the Customs.

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 What are the way of collection procedures under export realization?
1. Advance Payment
2. Collection basis
 DP Basis (Document against Payment)
 DA Basis (Documents against Acceptance

***Special Instruction of Export proceeds realizations***:

 As per BB guideline proceed should be collected within 120 days’ form shipment
 BB approval is need if commission & other charge is deduced more that 5% of bill value
 AD may remit excess claim against Short Weight Claim, Quality Claim and Partial Shipment not
exceeding 10% of the repatriated export proceeds except other than Garments & Jute Goods.
 Triplicate copy of EXP should be reported in BB Online Software after collection of proceeds
What are the Procedures/steps for the realization of export proceeds?
o Presentation of Documents to the Bank for Negotiation
o Dispatch of Documents
o Acceptance of the bill of exchange
 Documents against Payment (Sight Drafts)
 Documents against Acceptance (Usance Draft)
o Letter of Indemnity
o Realization of Export Proceeds
o Processing of GR (Guaranteed Remittance) Form.
Issuing of Proceed Realization certificate(PRC):
PRC (Proceed Realization Certificate) is the authentication/verification from the processing bank that
remittance has been received and processed from an overseas arrangement. It is issued by beneficiary bank in
favor of the exporter as evidence for realizing certain export proceed.
 PRC Value will not have exceeded than actual collection value
 Issuing charge of Tk 500 with vat to be realized for each PRC.

What are Highest Priority Sector for Export financing

 Agro−product & Agro−Processed products
 Pharmaceutical products
 Software & ICT products
 Plastic Products
 Home Textile
 Footwear & Leather products
 Furniture Industries
 Terri Towel
 Ocean going Ship Building Industries
 Tourism Industry

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 Export. Part -III

UCPDC 600 (Uniform Customs & Practice for Documentary Credits) - What does UCPDC 600 means?
The Uniform Customs & Practice for Documentary Credits (UCP 600) is a set of rules agreed by the International
Chamber of Commerce, which apply to finance institutions which issue Letters of Credit – financial instruments
helping companies finance trade. Many banks and lenders are subject to this regulation, which aims to
standardize international trade, reduce the risks of trading goods and services, and govern trade.

What’s the purpose of UCP 600?

The UCP 600 replaced the UCP 500 on the 1st July 2007. It was brought about to standardize a set of rules aiming
to benefit all parties during a trade finance transaction. UCP 600 was created by industry experts, and mandated
by the Banking Commission, rather than through legislation.

What are the essential Parties involved in documentary credit transections under UCPDC 600.

 Applicant: the party on whose request the credit is issued (the buyer).
 Issuing Bank: the bank that issues a credit at the request of an applicant or on its own behalf.
 Advising Bank: the bank that advises the credit at the request of the issuing bank.
 Confirming Bank: the bank that adds its confirmation to a credit, in addition to that of the issuing bank,
to honor or negotiate a complying presentation.
 Nominated Bank: the bank with which the credit is available or any bank in the case it is available with
any bank.
 Beneficiary: the party in whose favor the credit is issued and normally the provider of the goods, services
or performance (the seller).

What is Complying Presentation?

Complying presentation means a presentation that is in accordance with the terms and conditions of the credit.

Honour means:
a. to pay at sight if the credit is available by sight payment.
b. to incur a deferred payment undertaking and pay at maturity if the credit is available by
deferred payment.
c. to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by
acceptance.

Is the UCP 600 legally binding?

Yes. The UCP 600 rules are voluntarily incorporated into contracts and have to be specifically outlined in trade
finance contracts in order to apply

What are Elements/ objectives/rules of the UCP 600?

1. Definition of key terms which are prevalent in international trade (e.g. honoring [of payments],
applicants, banking days, presentation)
2. How international trade documents (Letters of Credit) can be signed and acknowledged by all parties
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 3. The difference between documents, goods and services (and which parties deal with these)
4. Which parts of a Letter of Credit are negotiable and non-negotiable
5. How credit works, and how payment is made
6. How banks can communicate the confirmation of goods (tele transmission)
7. Transportation of the goods, modes of transport, and who bears responsibility
8. How to deal with discrepancies, waivers and giving notice
9. The provision of original documents or electronic copies
10. Bills of Lading
11. Insurance and covering the cost of goods
12. Loss of shipping documents in transit
13. To make it easier to trade with each other
14. Uniform rules accepted by the member

Summary of the Key Articles in the ICC UCP 600

Articles 1 – 5 – General Provisions and Definitions
Articles 6 – 13 – Liabilities and Responsibilities
Articles 14 – Examination of Documents
Article 15 – 17 – Examination of Documents
Articles 18 – 28 – Documents
Articles 29 – 33 – Miscellaneous Provisions
Articles 34 – 37 – Disclaimers
Articles 38 – 39 – Transferable Credit & Assignment

URDG 758 - overview

The ICC Uniform Rules for Demand Guarantees (URDG) reflect international standard practice in the use of
demand guarantees and balance the legitimate interests of all parties.

 Article 1 makes it clear that the rules apply to a demand guarantee or counter-guarantee when such
instrument includes a statement as to the applicability of the rules. Those familiar with other ICC rules
will recognize the premise that the rules are binding on all parties unless modified or excluded by the text
of the guarantee or counter-guarantee.
 As with other ICC rules, these rules contain a number of key definitions and interpretations. It is strongly
recommended that practitioners read articles 2 (definitions) and 3 (interpretations) very carefully so as to
understand the intentions and implications of each definition and interpretation.
 Article 4 concerns itself primarily with the irrevocability of the guarantee. A guarantee is considered as
issued once it is dispatched, transmitted or handed over, and irrevocability commences from that
moment - even if the guarantee does not specifically state that it is irrevocable.
 Article 5, relating to the independence of guarantees and counter-guarantees is indirectly lifted from the
UCP where it has been tried and tested over many years.
 As a natural consequence of article 5, article 6 highlights that a guarantor is only concerned with
‘documents'.
 The key point within article 7 is that a demand guarantee is documentary by nature, and therefore any
non-documentary conditions are to be ignored.

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  Article 8 addresses the recommended content of an instruction or guarantee that should always be
apparent.
 On occasion, a guarantor may not be in a position to issue a guarantee. This is covered by article 9.
 Article 11 focuses on amendments and much of the content will be recognisable to those acquainted with
the UCP.
 Article 12 outlines that the liability of the guarantor extends only so far as that expressed in the terms
and conditions of the guarantee, and in accordance with the rules as far as they are consistent with the
guarantee, up to the maximum amount stated.
 It is common practice that the amount of a demand guarantee can often be decreased (or occasionally
increased) during its lifetime, either on certain dates or on the date of a particular action or event, and
this is covered by article 13.
 It is important that close attention is paid to article 14 (presentation), as non-adherence is likely to result
in a non-complying demand. Ensure that you understand the meaning of ‘presentation' by referring to
the definition given in article 2 of the rules: "means the delivery of a document under a guarantee to the
guarantor or the document so delivered. It includes a presentation other than for a demand, for example,
a presentation for the purpose of triggering the expiry of the guarantee or a variation of its amount".
 The requirements for any demand, and information about the demand, are addressed in articles 15 and
16.
 Continuing in the same vein, articles 17 and 18 cover partial, multiple and separateness of demands.
 Article 19 looks at the examination process which has three facets; data is examined within the document
itself, against the guarantee, and in line with the applicable rules. Absolute strict compliance of data is
not required provided that any data does not conflict with other data in the document itself, any other
document or the guarantee.
 As outlined in article 20, a guarantor has up to five business days following the day of presentation to
examine a demand in order to ascertain if it is compliant. It should be noted that this is a maximum
period. Examination will, generally, be completed over a shorter period as dictated by local practice and
competitive issues.
 Article 21 addresses the currency of the payment, whilst article 22 focuses on transmission of copies of a
complying demand.
 A scenario frequently seen in the area of demand guarantees is ‘extend or pay' which relates to a
beneficiary requesting an extension to the expiry or, if this is not given, settlement of its demand for
payment. Article 23 expands upon this situation.
 Not all demands are compliant and article 24 outlines the procedure to be followed in the event of a non-
compliant demand.
 Article 25 lists the three scenarios when the amount payable under a guarantee can be reduced.
 It could be the case that one of the parties involved in a guarantee transaction is prevented from
performing an action by a force majeure event that is outside its control. As stated in article 26, such
circumstances include acts of God, riots, civil commotions, insurrections, wars, acts of terrorism or any
causes beyond the control of the guarantor.
 Article 27, disclaimer on effectiveness of documents, is sourced from the UCP and adapted for demand
guarantees.
 Based upon article 28, a guarantor is exempted from liability for the consequences of a number of
transmission events including: delay or late delivery by a delivery service; disruption in the sending of
electronic data; loss of a document or data; mutilation of a document; errors in the transmission of any
document.
 Articles 29 and 30 cover disclaimers for the acts of another party and limits on exemption from liability.

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  Article 31 addresses obligations and responsibilities imposed by foreign laws and usages.
 Clarification of the party responsible for the payment of charges or fees is important and is covered by
article 32.
 Transfer and assignment are covered in detail within article 33.
 As covered in article 34, unless there is a condition to the contrary within the guarantee or counter-
guarantee text, the governing law of a guarantee will be that of the place of business of the guarantor,
and of a counter-guarantee will be that of the place of business of the counter-guarantor.
 Article 35, jurisdiction, follows a very similar approach to that expounded upon in article 34.

What is URC 522?

The ICC Uniform Rules for Collections (URC) are a set of Rules helping all the counterparties in a collection
process of debt, owned money or assets. The rules were created to resolve the daily operational problems of the
practitioners.
The Uniform Rules for Collections are an important protection for banks, traders, buyers, and sellers because
they outline the responsibilities of each party when it comes to the collection of goods or money owed.
In essence, the URC 522 rules outline what banks should do with documents against acceptance (D/A) and
documents against payment (D/P).
1. Documents against payment require the importer to pay the face amount of the draft at sight.
2. Documents against acceptance require the importer to pay on a specified date.

What are the benefits/Roles of URC?

 Safeguarding applicability in a constantly evolving digital trade sector
 Isolating the risk from a physical paper environment to the electronic systems
 Supporting the usage of electronic records
 Unity as opposed to divergent national and regional practice
 Standardization of terminologies and objectives
 Enabling and supporting trade finance between regions and countries regardless of underlying economic and
judicial structures

URC 522 is divided into 26 articles under 7 distinct sections:

 General Provisions and Definitions - articles 1-3.

 Form and Structure of Collections - article 4.
 Form of Presentation - articles 5-8.
 Liabilities and Responsibilities - articles 9-15.
 Payment - articles 16-19.
 Interest, Charges and Expenses - articles 20-21.

Incoterms:
Uses if Incoterms:
 Determine the right and responsibility of the parties
 Determine Cost, Risk and Obligations of the parties
 To understand the acceptable and uniform trade terms for all
 Minimize the trade dispute
 To use basic terms of transport and delivery of goods
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The 11 Incoterms are grouped as follows:
The eleven rules are divided into two main groups:
Rules for any mode or modes of transport Rules for sea or inland waterway transport only

• Ex Works EXW • Free Alongside Ship FAS

• Free Carrier FCA • Free On Board FOB
• Carriage Paid To CPT • Cost and Freight CFR
• Carriage & Insurance Paid to CIP • Cost Insurance and Freight CIF
• Delivered At Terminal DAT
• Delivered At Place DAP
• Delivered Duty Paid DDP

URR-725
What is the Scope of URR 725?
The URR 725 are the Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits ICC publication No. 725.
The Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits, ICC Publication No. 725, shall
apply to any bank-to-bank reimbursement under documentary credits, when the reimbursement authorization
expressly indicates that it is subject to these rules.

The rules are binding on all parties thereto, unless expressly modified or excluded by the reimbursement
authorization.

URR 725 consists of total 17 articles.

 URR 725 – Article 1 Application of URR

 URR 725 – Article 2 Definitions
 URR 725 – Article 3 Reimbursement Authorizations Versus Credits
 URR 725 – Article 4 Honour of a Reimbursement Claim
 URR 725 – Article 5 Responsibility of the Issuing Bank
 URR 725 – Article 6 Issuance and Receipt of a Reimbursement Authorization or Reimbursement
Amendment
 URR 725 – Article 7 Expiry of a Reimbursement Authorization
 URR 725 – Article 8 Amendment or Cancellation of a Reimbursement Authorization
 URR 725 – Article 9 Reimbursement Undertaking
 URR 725 – Article 10 Standards for a Reimbursement Claim
 URR 725 – Article 11 Processing a Reimbursement Claim
 URR 725 – Article 12 Duplication of a Reimbursement Authorization
 URR 725 – Article 13 Foreign Laws and Usages
 URR 725 – Article 14 Disclaimer on the Transmission of Messages
 URR 725 – Article 15 Force Majeure
 URR 725 – Article 16 Charges
 URR 725 – Article 17 Interest Claims/Loss of Value

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Definitions from URR 725:

 “Reimbursing bank” means the bank instructed or authorized to provide reimbursement pursuant to a
reimbursement authorization issued by the issuing bank
 “Reimbursement authorization” means an instruction or authorization, independent of the credit, issued
by an issuing bank to a reimbursing bank to reimburse a claiming bank bank.
 “Reimbursement undertaking” means a separate irrevocable undertaking of the reimbursing bank,
issued upon the authorization or request of the issuing bank,
 “Claiming bank”. “Claiming bank” includes a bank authorized to present a reimbursement claim to the
reimbursing bank on behalf of the bank that honours or negotiates.

Benefit of ISP 98 – International Standby Practices

ISP 98 International Standby Practices was written exclusively for standby letters of credit.

Prior to ISP 98 standby letters of credit were issued under commercial letters of credit rules. This was not an
effective way as standby letters of credit and commercial letters of credit have significant differences with
regards to scope and practice.

ISP 98 has been reduced the cost and time of drafting, limit problems in handling and avoid countless disputes
and unnecessary litigation that have resulted from the absence of internationally agreed rules on standby letters
of credit.

ISP-98 Rules
 contain precise definitions of key terms such as “original” and “automatic amendment”
 cover in detail the standby process from “Obligations” to “Syndication”
 provide neutral rules acceptable in most situations
 save both time and money in negotiating and drafting standby terms
 help avoid litigation and unexpected loss
 propose basic definitions should the standby involve presentation of documents by electronic means
 provide international standards for the use of this fast growing financial instrument

Table of Contents
 Rule 1 General Provisions
 Rule 2 Obligations
 Rule 3 Presentations
 Rule 4 Examination
 Rule 5 Notice, Preclusion, and Disposition of Documents
 Rule 6 Transfer, Assignment, and Transfer by Operation of Law
 Rule 7 Cancellation
 Rule 8 Reimbursement Obligations
 Rule 9 Timing
 Rule 10 Syndication/Participation

ISBP 745 - What is ISBP 745?

The International Standard Banking Practice (ISBP) is a publication of the International Chamber of Commerce
(ICC). It offers crucial guidance on the documents presented against letters of credit. Take note that ISBP does
not change UCP 600 rules when it comes to letters of credit. However, it is a valuable guide to Uniform Customs

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and Practice (UCP).

ISBP 2013 enables to apply banking practices under UCP 600 to various trade documents, e.g., invoices, transport
documents, bills of lading, and certificate of origin. ISBP also addresses documents, not treated in previous
editions:

 Packing list
 Weight list
 Beneficiary certificate
 Non-negotiable sea waybills
 Analysis, inspection, health, quantity and quality certificate

The contents of ISBP 745 are as follows:

 Preliminary Considerations
 General Principles
 Drafts and Calculation of Maturity Date
 Invoices,
 Transport Documents covering at least two different modes of transport
 Bills of Lading
 Non-Negotiable Sea Waybill
 Charter Party Bill of Lading
 Air Transport Document
 Road, Rail or Inland Waterway Transport Documents
 Insurance Document and coverage
 Certificate of Origin
 Packing List, Note or Slip
 Weight List, Note or Slip
 Beneficiary’s Certificate
 Analysis, Inspection, Health, Phytosanitary, Quantity Quality and Other Certificates.

Foreign Remittance
Student’s File:
Student file is opened by AD Branch for admission / study of Bangladesh Nationals in regular courses in
recognized abroad institute such as Under graduate, Post Graduate, Language Course for bachelor degree
and professional diploma / certificate course
Steps and process/ Procedure of dealings of student files:
i.Application dully filled and signed
ii.Copy of Valid Passport
iii.Original / copy of admission letter issued by foreign institution infavour of the student.
iv. Attested copy of all educational certificate
v. Original / copy of estimated annual tuition fees and other expenses issued by concern educational
institution
vi. Travel quota is allowed in additional of tuition fee.

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 vii. Money expenses can be transferred to student’s personal account maintaining in abroad if expense
is not included with tuition fees.
viii. Student file for School Level Study can be opened only upon BB approval.

Systems of reporting of student files:

− All Outward Remittance except Cash: Summary Statement of “S−1” supported by “TM Form”
− For Cash Remittance: Summary Statement of “S−6” supported by “TM Form”
Foreign Demand Draft (FDD)
Foreign Demand Draft is a physical mode of money transfer in foreign currency. It is beneficial
for the sender to make a bank draft because it is secure and can only be credited to the specified
beneficiary’s bank account.
1. It is a mode of Remittance
2. To be Crossed and Account Payee only
3. Should be mentioned − Issue date, Amount in word and Figure
4. Drawee Bank with Branch name must appear on the face of the Instrument
5. Signature of Two Bank Officers
6. Bank receive local amount and convert it in to foreign currency
7. FDD may be issue from retention quota to meet up travelling cost, import cost etc.
8. Amount to be fixed as per BB guideline

Foreign Telegraphic Transfer (FTT)

A foreign telegraphic transfer is an electronic method of transferring funds utilized primarily for
overseas wire transactions. Typically, telegraphic transfer is complete within two to four business
days, depending on the origin and destination of the transfer, as well as any currency exchange
requirements
1. Quick transfer of fund with instruction
2. Safety and reliability
3. Minimum cost
4. Less settlement risk
5. Format base message
Western Union:
Western union is a world leader money transferring service provider located in more than 200 countries.
Features:

1. Safe and reliable

2. Simple way to receive cash
3. Low transferring cost
4. Low consuming time
5. Worldwide network
6. Country wide agent service

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Inward Remittance (Sources)
1. Export Proceed
2. Remittance by Bangladeshi nationals working abroad (Wage Earner’s)
3. Foreign Loan / Donation/ Aid/ Gift
4. Profit earning from Investment in Foreign
5. Out Sourcing by software developer − (60% retention quota)

Bringing foreign currency while entering in to Bangladesh

1. For more than 5000 USD or other foreign currency (cash, draft etc.) declaration is need in
“FormFMJ” to custom authority.
2. Declaration in “Form − C” is not needed for bringing money up to 10000/− USD or equivalent.

Outgoing/outward Remittance:
When someone transfers money from their domestic account to a bank account in another country, it is called a
foreign remittance, or more specifically, an outward foreign remittance.

Benefits of Outward Remittance

Outward remittance allows the sender to quickly remit money if their friend or family abroad needs it urgently.
International remittances are done on a secure banking network, limiting the chances of fraud and financial
harm to the sender and recipient. It allows the sender to be there for the recipient even from miles away, and
provide a financial safety net.

When to Choose Outward Remittance

 Cover educational costs
 Cover living expenses of a family member
 Pay for travel trips taken
 Medical treatments
 Buying assets abroad
 Gifting or donating to an individual or organization

Steps in the Outward Remittance Process

1. Select the most suitable remittance service
2. Collect the recipient’s details
3. Complete the transaction
Outward/ outgoing remittances are −

1. Commercial remittance Other than Import

2. Private Remittance
3. Travel

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Commercial remittance Other than Import

 Remittance for freight and passage of foreign Airline and Shipping Companies.
 Operating expenses of Bangladesh Shipping Company and Bangaldesh Biman.
 Export Claim against Shot Weight, Quantity Claim and Part Shipment up to 10% of
repatriate amount.
 Opening of branches or subsidiary company in abroad. Annual celling for Currant
Expenses up to USD 30000.
 Remittance of royalty and technical fees.
 Remittance for Profit of Bank, Insurance and Other FIs.
 Dividend to non−resident share holder.
 Cost/Fees for Reutter monitoring
 Cost/Fees of SWIFT
 Advertisement of Bangladeshi Products in mass media abroad
 Bank Charges and sundries (i.e− Interest for Foreign Loan, OBU Charges, Buyer’s
CreditCharger / Interest and other incidental charges)
 Local Satellite Channel distributors fee to principal

Private Remittance

 Transfer of Assets by Foreign nationals who are retiring Job from Bangladesh, approved
by BIDA.
 Sale proceeds of Real Assets and Home Articles.
 Family maintenance for foreign national, can remit up to 75% of net monthly saving
 Leave Salary of foreign national
 Membership fees and registration fees, admission, examination etc.
 Cost for study aboard
 Consular fees
 For immigration of Visa processing fee, evaluation fees, right of landing fees.
 Family maintenance in abroad by resident
 Registration fee for attending training, seminar, workshop abroad.
 Academic/ research / journal subscription
 Other private remittance

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Travel/TravelQouta:

01. Foreign Exchange Transactions-2018, Vol-1 and its subsequent circulars in terms of which Authorized Dealers
(ADs)are allowed to release foreign exchange to an adult Bangladesh national during a calendar year up to
USD 12,000 or equivalent, inter alia, for travel abroad without limiting to regions or countries of travel.
In accordance with the decision, global limit of travel entitlement for an adult passenger shall
stand at USD 12,000 during a calendar year without limiting to regions or countries of travel.
For minors (below 12 years in age) the applicable quota, as before, will be half the amount
admissible for adults. As usual, release of foreign exchange in the form of USD notes shall
not exceed USD 5,000 per person within the entitlement.

02. To bring flexibility in releasing foreign exchange for private travel, it has been decided
that:
(a) ADs may endorse/set travel entitlements on relevant passports to concerned Bangladeshi
nationals in international cards for multiple years up to their validity, subject to compliance
with the following instructions:
(i) Yearly use shall not exceed the limit.
(ii) Unused quota shall not be brought forward to following years.
(iii) Bangladesh nationals proceeding abroad for employment/immigration or study purpose
will not be eligible to avail this facility. Multiple endorsement should be discontinued for
such individuals.
(iv) Supplementary cardholders may avail this facility against their own travel entitlement
with endorsement on own passports.
(b) The time limit for annual travel quota will be counted from January 01 to December 31.
If the travel involves subsequent year, travel entitlement will be counted for the particular year to
which the transaction date relates. In that case, post facto endorsement will be required for the
subsequent year unless multiple years’ endorsement facility has been used; particularly under
international cards. Reporting to Bangladesh Bank for such cases will be based on transactions date.

(c) In case of exceeding the quota limit endorsed through international cards, without
availing the facility as noted at 2 above, while on travel abroad, for unavoidable but bonafide
grounds acceptable to ADs, the excess amounts may be adjusted in the following ways:

(i) By debit to RFCD accounts of relevant travelers;

(ii) Excess amount not exceeding USD 500 or equivalent may be adjusted against travel
quota of the following year without prior approval from Bangladesh Bank if option (i) is not
possible to be executed

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 Instant Cash:
“Instant Cash Global Money Transfer” popularly known as “Instant Cash” is one of the faster growing money
transfer companies in the world. The Company is a member of the “Emirate Post Group” owned by UAE
Government. At the time of sending money a PIN/Control number is provided by the agency and the beneficiary
get money by showing this PIN and NID along with fill and sign “Remittance Pay Slip”

Feature:
1. Safe and reliable
2. Simple way to receive cash
3. Fund can be transferred directly to beneficiary’s bank a/c or mobile a/c.
4. Low transferring cost
5. Low consuming time
6. Worldwide network
7. Country wide agent service

What are process and procedures of Endorsement of Passport:

Endorsement” means an official stamped, typed, or written indication of the circumstances under which a
passport was issued or can be used.

 TM Form to be signed by applicant in each time of endorsement.

 Validity of passport with Visa.
 Check available quota for endorsement.
 Bank/Money changer should be satisfying the purpose of endorsement.
 Passport and TM signature to be same.
 Currency, date, country and purpose should be mentioned in passport by endorser / bank.
 Fee Tk. 500 with vat per passport in TBL.
 Necessary posting on Flora System.
 TM should be posted in On Line Monitoring System of BB web portal.
 Hard copy of TM to be submitted at the time of monthly return.

SWIFT and SWIFT MT

SWIFT is a messaging network that financial institutions use to securely transmit information and instructions
through a standardized system of code.
SWIFT assigns each financial organization a unique code that has either eight characters or 11
characters. The code is called interchangeably the bank identifier code (BIC).
To understand how the code is assigned:
 First four characters: the institute code (TTBL - Trust Bank Limited)
 Next two characters: the country code (BD for the country - Bangladesh)
 Next two characters: the location/city code (DH for Dhaka)
 04 Last three characters: optional, but organizations use it to assign codes to individual

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 branches.
Example: Trust Bank Limited, Principal Branch may use the code TTBLBDDH002.
SWIFT groups message types into the following categories:

 MT-100: Customer Payments and Cheques.

 MT-200: Financial Institution Transfers.
 MT-300: Treasury Markets: Foreign Exchange and Derivatives.
 MT-400: Collections and Cash Letters.
 MT-500: Securities Markets.
 MT-600: Treasury Markets: Precious Metals and Syndications.
 MT-700: Documentary Credits and Guarantees.
 MT-800: Traveler Chrque.
 MT-900: Cash Management and customer.

SWIFT MT Messages
The SWIFT MT message standard is split into four areas, Payments, Trade Services, Securities and Trading. A
complete inventory of available SWIFT MT messages can be found on SWIFT’s website.

Rate used in different types of inward and outward remittance.

Selling:
1 BC Selling: Sale for Import Bill where involvement of handling of documents by the bank.
− Import Bill Payment
2 TT/OD: All Sale Transaction (Outward Remittance) other than Import where
noinvolvement of handling of documents by the bank, Clean Sale.
−Transfer FC A/C to FC A/C
Buying:
1 TT (clean): Highest buying rate for bank. The basis rate from which all other buying rate is
calculated.
−Wage earners remittance, Family Expenses
2 TT (Doc): Handling of Document. Bank recovers handling charges on the transaction
−Documents Collection, Advance Payment of Export Bill, Collection of FDD / Cheque
3. OD Sight Export: TT (clean) buying rate loaded with (Less) Interest for the Transit Period.
−Purchase / Negotiation of Export Bills, Realization of Export Proceeds
4. OD Transfer: Purchase of non−export bill, drafts and personal cheque
−Purchase of FDD / Cheque /TC

What are the Function Treasury management?

1. Foreign exchange trading

2. Money market trading
3. Liquidity management
4. Maintaining of reserve requirement
5. Handling govt. bond, securities etc.
6. Inter branch fund management.
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 Offshore Banking

Offshore banking units conduct their activities with non−resident by taking deposit and lending without conflicting
with the domestic fiscal and monitory policy.

What are the Legal Framework OBU?

 OBU is free to accept deposits or borrow fund from:

 Non−Resident Bangladeshi (including Bangladesh National working abroad)
 Non−Resident company/institutions
 Type A categories companies of EPZ
 As foreign correspondent from banks operated in Bangladesh

 OBU shall not accept deposit from:

 Persons/institutions resident in Bangladesh
 Type B and C units in EPZ
What are the different Products and services provided by offshore banking unit?

Deposit products:

 Offshore current Account

 Offshore Savings Account
 Offshore short Noted Deposit Account
 Offshore Term Deposit Account
Loan Products:

 Working Capital Finance

 Overdraft
 Trust Receipts
 Term Loan (Short Term and Long Term)
 Import Finance
 Packing Credit
 Discounting/Purchase of accepted bills
 IBP against direct/Deemed Export
Trade Service Products:

 Letter of Credit (Sight and Deferred)

 Back to Back letter of Credit
 Advising of letter of Credit
 Transfer of letter of Credit
 EXP certifying
 Negotiating/discounting of Export Bill
 Processing of Export Bill under DP/DA
 Inward and Outward remittance
 Bill discounting arranged by buyer’s bank or UPAS (buyer’s credit)

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 What are the Sources of Profit/Margin from OBU?

 L/C issuance Commission

 Interest on Investment (Term Loan)
 Export Bill negotiation/collection charge.
 Issuance of Guarantee Commission.
 L/C advising/ Ad confirming charges.
 Interest from UPAS L/C.
 Income from other trade related sources.

What are the Major Challenges in OBU?

 Establishment of a liability line

 Relationship challenges
 Liquidity management
 Regular Risk factor (Market Risk, credit risk, liquidity risk, operational risk, legal and regulatory
risk)
 Offshore banking has often been associated with the underground economy and
organized crime, via taxevasion [3] and money laundering.
Export Development Fund (EDF)

EDF has been established in 1989 by Bangladesh Bank with assistant of the International
Development Association (IDA) for promoting exporter to meet their import cost for
non−traditional Item.

Procedure of EDF Refinance

 Application for Opening LC under EDF

 HO claim fund to BB
 BB credited Fund in FC Clearing A/C
 Providing approval to AD for Payment
 Recovery of Fund in maturity
 Arrangement of Fund after receiving documents
 Return to BB through HO.
 Seeking BB permission through HO
 Opening of LC after HO approval

Page 32 of 32 Prepared by: Md. Sirajul Islam Bhuiyan